Azul enters bankruptcy protection

August 2025 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

August 2025 Issue

Brazilian airline Azul has filed for Chapter 11 bankruptcy protection in the US, aiming to eliminate debt largely accumulated during the pandemic. The move casts doubt over its proposed merger with local rival Gol, a deal that would have created Brazil’s largest carrier.

Azul filed for bankruptcy protection in the US Bankruptcy Court for the Southern District of New York. It has entered into restructuring agreements with bondholders, its largest aircraft lessor AerCap, and shareholder United Airlines, as part of a broader plan to stabilise its financial position. The filing was made in the US because most of Azul’s investors are foreign, with a significant portion of its bondholders based in the US.

Through the restructuring, Azul aims to eliminate over $2bn in debt and is considering raising up to $950m in new equity financing upon emergence from bankruptcy. The company also plans to use the process to reduce lease obligations and optimise its fleet, enabling it to emerge with greater flexibility and a more sustainable capital structure. Azul stated that some existing lenders have committed to providing $1.6bn in debtor-in-possession (DIP) financing. This loan is expected to be repaid using proceeds from a $650m equity rights offering following the company’s exit from Chapter 11. The share sale will be underwritten by some of its lenders. Additionally, Azul may raise up to $300m by selling shares to American Airlines and United Airlines.

“Azul continues to fly – today, tomorrow, and into the future,” said John Rodgerson, chief executive of Azul. “These Agreements mark a significant step forward in the transformation of our business – one that enables us to emerge as an industry leader in the main aspects of our business. With a collaborative approach and the support of our stakeholders, we have made a strategic decision to pursue a voluntary financial restructuring as a proactive move to optimize our capital structure – which was burdened by the COVID-19 pandemic, macroeconomic headwinds, and aviation supply chain issues.

“Our strategy is not just about financial reorganization,” he continued. “By using this process, we believe that we are creating a robust, resilient, industry-leading airline – one that Customers will continue to love flying, at which Crewmembers will continue to love working, and that will create value for our stakeholders.”

“AerCap has signed a support agreement with its longstanding partner Azul,” said Aengus Kelly, chief executive of AerCap. “As the airline moves through its restructuring process, we are very confident Azul will emerge stronger than ever. Together with Azul, we are the largest owners of Embraer E2 commercial aircraft, supporting the Brazilian aviation industry like no other.”

Founded in 2008, Azul disrupted the dominance of LatAm and Gol in Brazil’s aviation sector by focusing on smaller cities underserved by other airlines. It is now the largest airline in Brazil in terms of departures and cities served, operating approximately 900 daily flights to around 137 destinations across the country, according to the filing. With a fleet of 226 aircraft and more than 16,000 crewmembers, Azul operates roughly 300 direct routes. Its network also includes select international destinations in the US, Portugal, France, Spain, Argentina, Uruguay, Paraguay and Curaçao.

However, Azul has struggled with the aftermath of the COVID-19 pandemic and broader economic challenges. The Latin American aviation industry as a whole has faced volatile currency fluctuations, rising costs and the lingering effects of the pandemic. Azul’s filing makes it the latest in a series of regional carriers to seek bankruptcy protection, following similar moves by LatAm and Gol.

In January, Gol and Azul announced plans to merge in a deal that would create a dominant player controlling around 60 percent of Brazil’s domestic market. However, it is now unclear whether the merger will proceed. Gol only received court approval in New York in May to conclude its own bankruptcy proceedings.

Richard Summerfield